K12, Inc. Under Investigation for Possible Securities Fraud

The investigation will center on whether the company and its executives have failed to disclose that its students have been chronically underperforming compared to their peers at traditional schools, which breaks key federal securities laws.

And, regardless of how well-suited K12’s curriculum may or may not be to prospective students, it is believed that the company has been on an aggressive recruiting campaign that has bloated its student-to-teacher ratios and experiences student retention problems resulting in high rates of withdrawal.

Despite these issues, K12 schools are thought to often advertise much more palatable student-to-teacher ratios and withdrawal records. It is thought that K12 teachers have been pressured to allow students to pass regardless of academic performance, which is important when trying to receive federal funds.

In an article in December, the New York Times raised concerns about K12′s business practices, alleging that K12 schools inflate their student rosters and are underperforming academically.